20451 Seneca Meadows Parkway
Germantown, Maryland 20876-7005
on October 22, 2020
The Annual
1.To electmeeting, submit questions and vote online. The Special Meeting can be accessed by visiting www.meetingcenter.io/295938943 and entering your 16-digit control number (included in thetwo nomineesproxy materials mailed to you). The purpose of theBoardSpecial Meeting will be the following:
| | | Important Notice Regarding the Availability of Proxy Materials for the Stockholders’ Meeting to Be Held on October 22, 2020 at 10:00 a.m. at www.meetingcenter.io/295938943. | | |
| | | The proxy statement is available at www.envisonreports.com/sens. | | |
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Secretary
September 4, 2020
| | | You are cordially invited to attend the meeting online. Whether or not you expect to attend the meeting, please vote by one of following methods as promptly as possible in order to ensure your representation at the |
record by a broker, bank or other nominee and you wish to vote online at the meeting, you must obtain a proxy issued in your name from that record holder. | |  |
Germantown, Maryland
We are primarily providing access to our proxy materials over the internet pursuant to the Securities and Exchange Commission's notice and access rules. On or about April 14, 2017, we expect to mail to our stockholders a Notice of Internet Availability of Proxy Materials that will indicate how to access our 2017 Proxy Statement and 2016 Annual Report on the internet and will include instructions on how you can receive a paper copy of the Annual Meeting materials, including the Notice of Annual Meeting, proxy statement and proxy card.
Whether or not you expect to attend the meeting in person, please submit voting instructions for your shares promptly using the directions on your Notice or, if you elected to receive printed proxy materials by mail, your proxy card, to vote by one of the following methods: 1) over the internet at www.envisionreports.com/sens, 2) by telephone by calling the toll-free number 1-800-652-8683, or 3) if you elected to receive printed proxy materials by mail, by marking, dating and signing your proxy card and returning it in the accompanying postage-paid envelope. Even if you have voted by proxy, you may still vote in person if you attend the meeting. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must obtain a proxy issued in your name from that record holder.
20451 Seneca Meadows Parkway
Germantown, Maryland 20876-7005
FOR THE
Pursuant to rules adopted by the Securities and Exchange Commission, or the SEC, we have elected to provide access to our proxy materials over the internet. Accordingly, we
internet.
Special Meeting, that list of stockholders will be available for examination by any stockholder of record at www.meetingcenter.io/295938943.
You may either vote "For" both
Beneficial Owner: Shares Registered in the Name of Broker or Bank
Internet proxy voting may be provided to allowmeeting, we urge you to vote your shares online, with procedures designedby proxy to ensure your vote is counted. You may still attend the authenticitySpecial Meeting and correctness of your proxy vote instructions. However, please be aware thatonline even if you must bear any costs associated with your internet access, such as usage charges from internet access providers and telephone companies.
September 2, 2020. Holders of Series A Preferred Stock are entitled to 2,101 votes for each share of Series A Preferred Stock held.
Can I change my vote after submitting my proxy?
bank or vote online at the Special Meeting.
For more information, and for more detailed requirements, please refer to our Amended and Restated Bylaws, filed as Exhibit 3.2 to our Current Report on Form 8-K, filed with the SEC on March 23, 2016.
How are votes counted?
Votes will be counted by the inspector of election appointed for the meeting, who will separately count, for the proposal to elect directors, votes "For," "Withhold" and broker non-votes and, with respect to the proposal to ratify the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017, votes "For," "Against" and abstentions. Broker non-votes have no effect and will not be counted towards the vote total for any proposal.
”
For
| | Proposal Number | | | Proposal Description | | | Vote Required for Approval | | | Effect of Abstentions | | | Effect of Broker Non- Votes | |
| | 1 | | | Senior Notes Conversion Share Issuance Proposal | | | “For” votes from the holders of a majority of the voting power of the shares present at the Special Meeting or represented by proxy and entitled to vote on the matter | | | Against | | | No effect | |
| | 2 | | | Amendment to our Amended and Restated Certificate of Incorporation to increase the authorized number of shares of common stock from 450,000,000 shares to 900,000,000 shares(1) | | | “For” votes from the holders of a majority of the voting power of the outstanding shares entitled to vote on the matter | | | Against | | | Against | |
To be approved, Proposal No. 2, ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2017, must receive "For" votes from the holders of a majority of shares present in person or represented by proxy and entitled to vote on the matter. If you mark your proxy to "Abstain" from voting, it will have the same effect as an "Against" vote. Broker non-votes will have no effect.
this proposal.
THE SENIOR NOTES CONVERSION SHARE ISSUANCE PROPOSAL
Our Board of Directors is divided
The Board of Directors presently has eight members. There are two directors in the class whose term of office expires in 2017. Each of the nominees listed below is currently a director who was previously elected by the stockholders. If elected at the Annual Meeting, each of these nominees would serve until the 2020 Annual Meeting and until his successor has been duly elected and qualified, or, if sooner, until the director's death, resignation or removal. It is our policy to invite and encourage directors and nominees for director to attend the Annual Meeting. We elected directors by written consent of our stockholders during 2016 and therefore did not hold an Annual Meeting.
Directors are elected by a plurality of the votes of the holders of shares present in person or represented by proxy and entitled to vote on the election of directors. Accordingly, the two nominees receiving the highest number of affirmative votes will be elected. Shares represented by executed proxies will be voted, if authority to do so is not withheld, for the election of the two nominees named below. If any nominee becomes unavailable for election as a result of an unexpected occurrence, shares that would have been voted for that nominee may instead be voted for the election of a substitute nominee proposed by our Board of Directors. Each person nominated for election has agreed to serve if elected, and we have no reason to believe that any nominee will be unable to serve.
The Nominating and Corporate Governance Committee of our Board of Directors seeks to assemble a board that, as a whole, possesses the appropriate balance of professional and industry knowledge, financial expertise and high-level management experience necessary to oversee and direct our business. To that end, the Nominating and Corporate Governance Committee has identified and evaluated nominees in the broader context of the overall composition of the Board of Directors,purchaser (together with the goal of recruiting members who complement and strengthen the skills of other members and who also exhibit integrity, collegiality, sound business judgment and other qualities that the Nominating and Corporate Governance Committee views as critical to effective functioning of the Board of Directors.
The biographies below include information, as of the date of this proxy statement, regarding the specific and particular experience, qualifications, attributes or skills of each nominee that led the Nominating and Corporate Governance Committee to recommend that person as a nominee for director. However, each member of the committee may have a variety of reasons why he believes a particular person would be an appropriate nominee for the Board of Directors, and these views may differ from the views of other members.
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2020 ANNUAL MEETING
Timothy T. Goodnow, Ph.D., age 55
Dr. Goodnow was elected as one of our directors and was appointed as our President and Chief Executive Officer in December 2015. From December 2010 to December 2015, Dr. Goodnow served on the Board of Directors of Senseonics, Incorporated and he served as the President and Chief Executive Officer of Senseonics, Incorporated from March 2011 to December 2015. Dr. Goodnow served as Vice President, Technical Operations of Abbott Diabetes Care, a healthcare company, from 2000 to February 2011. Prior to that, he held positions at TheraSense, Verax Biomedical, Inc. and Dade Behring and Baxter Healthcare. Dr. Goodnow received his Ph.D. and B.S. in chemistry from The University of
Miami. Our Board of Directors believes that Dr. Goodnow's experience as our President and Chief Executive Officer, his background in medical device development and his knowledge of the diabetes industry qualify him to serve as a director of our company.
M. James Barrett, Ph.D., age 74
Dr. Barrett was elected to our Board of Directors in December 2015. Dr. Barrett founded Senseonics, Incorporated and served as a member of the Board of Directors of Senseonics, Incorporated from November 1996 to December 2015. He served as the Chief Executive Officer of Senseonics, Incorporated from 1997 to 2001. He currently serves as a General Partner of New Enterprise Associates, or NEA, a venture capital firm, where he specializes in biotechnology and works with members of NEA's healthcare investment group on medical devices, healthcare information systems and healthcare services companies. Prior to joining NEA and Senseonics, Incorporated, he led three NEA-funded companies, serving from 1987 to 1995 as Chairman and Chief Executive Officer at Genetic Therapy, Inc. and from 1982 to 1987 as President and Chief Executive Officer at Life Technologies, Inc. and its predecessor, Bethesda Research Laboratories, Inc. Previously, Dr. Barrett worked at SmithKline Beecham Corporation, where he held a variety of positions, including President of its In Vitro Diagnostic Division and President of SmithKline Clinical Laboratories. He currently serves on the boards of directors of the publicly-held life sciences companies GlycoMimetics, Inc., Clovis Oncology, Inc., Proteostasis Therapeutics, Inc. and Roka Bioscience, Inc. In the past five years, he has served on the boards of directors of the publicly traded companies Amicus Therapeutics, Inc., Inhibitex, Inc. (acquired by Bristol-Myers Squibb Co.), Loxo Oncology, Inc., Supernus Pharmaceuticals, Inc., Targacept, Inc. and Zosano Pharma Corporation. Dr. Barrett received his Ph.D. in biochemistry from the University of Tennessee, his M.B.A. from the University of Santa Clara and his B.S. from Boston College. Our Board of Directors believes that Dr. Barrett's experience overseeing NEA's investments in biotechnology, serving as a member of the Board of Directors of other public companies, prior senior management experience, including as President and Chief Executive Officer of biopharmaceutical companies, and his strong capital markets experience qualify him to serve as a director of our company.
THE BOARD OF DIRECTORS RECOMMENDSA VOTE "FOR" EACH NAMED NOMINEE.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2018 ANNUAL MEETING
Steven Edelman, M.D.., age 61
Dr. Edelman was elected to our Board of Directors in September 2016. Dr. Edelman has served as a Professor of Medicine in the Division of Endocrinology, Diabetes & Metabolism at the University of California, San Diego and the Veterans Affairs Healthcare System of San Diego since 2001. He also currently serves as a director of Taking Control of Your Diabetes, a non-profit organization promoting patient education, motivation and self-advocacy that he founded in 1995, and the Diabetes Care Clinic VA Medical Center. Dr. Edelman received his B.A. and his M.S. in Biology from the University of California, Los Angeles and his M.D. from the University of California, Davis. Our Board of Directors believes that Dr. Edelman's substantial diabetes industry experience qualifies him to serve as a director of our company.
Edward J. Fiorentino, age 58
Mr. Fiorentino was elected to our Board of Directors in December 2015. Mr. Fiorentino served on the Senseonics, Incorporated Board of Directors from March 2012 to December 2015. Since March 2016, Mr. Fiorentino has served as Chairman and Chief Executive Officer of TerSera Therapeutics, a specialty pharmaceutical company. Previously, from August 2013 to January 2016, Mr. Fiorentino has
served as Chairman and Chief Executive Officer of Crealta Pharmaceuticals, a specialty pharmaceutical company. From March 2009 to June 2013, he was the Chief Executive Officer of Actient Pharmaceuticals. Prior to Actient, Mr. Fiorentino served in various positions at Abbott Laboratories, including Corporate Vice President of Pharmaceutical Commercial Operations, for more than 20 years. He also previously served as Senior Vice President and President of Abbott Diabetes Care and was Executive Vice President of TAP Pharmaceuticals. Mr. Fiorentino received his B.S. in Business Administration from the State University of New York and his M.B.A. from Syracuse University. Our Board of Directors believes that Mr. Fiorentino's substantial healthcare and pharmaceutical experience qualifies him to serve as a director of our company.
Peter Justin Klein, M.D., J.D., age 39
Dr. Klein was elected to our Board of Directors in December 2015. Dr. Klein served on the Senseonics, Incorporated Board of Directors from September 2013 to December 2015. Dr. Klein has served as a Partner at NEA since 2006. Prior to joining NEA, Dr. Klein worked for the Duke University Health System. Dr. Klein currently serves as a director of several private life sciences companies. Dr. Klein received his A.B., B.S. and M.D. from Duke University and his J.D. from Harvard Law School. Our Board of Directors believes that Dr. Klein's significant legal and medical expertise in healthcare and his services as a venture capital investor and director of multiple biotechnology and medical device companies qualify him to serve as a director of our company.
DIRECTORS CONTINUING IN OFFICE UNTIL THE 2019 ANNUAL MEETING
Stephen P. DeFalco, age 56
Mr. DeFalco was elected as a director and our chairman in December 2015. Mr. DeFalco served as chairman of the Senseonics, Incorporated Board of Directors from June 2010 to December 2015 and served as Senseonics, Incorporated's interim Chief Executive Officer from 2010 to March 2011. Since October 2011, Mr. DeFalco has served as the Chief Executive Officer of Crane & Co, Inc., a global technology company, and also serves on its Board of Directors. Previously, from May 2005 to July 2010, he served as the Chief Executive Officer and on the Board of Directors of MDS, Inc., a public life sciences company. Mr. DeFalco received his M.B.A. from the Massachusetts Institute of Technology—Sloan School of Management, his M.S.E.E. from Syracuse University and his B.S.M.E. from the Massachusetts Institute of Technology. Our Board of Directors believes that Mr. DeFalco's leadership, executive, managerial and business experience with life sciences companies qualifies him to serve as a director of our company.
Douglas S. Prince, age 63
Mr. Prince was elected to our Board of Directors in December 2015. Mr. Prince served on the Senseonics, Incorporated Board of Directors from February 2015 to December 2015. Mr. Prince has acted as the Chief Financial Officer of Crane & Co. Inc., a global technology company, since February 2013. Prior to Crane & Co., from October 2010 to January 2013, Mr. Prince served as the Chief Financial Officer of Northern Power Systems Corp., an energy technology company. From 2007 to 2010, Mr. Prince served as Chief Financial Officer of MDS Inc., a public life sciences company. Mr. Prince received his B.B.A. in Business Administration from the University of Kentucky. Our Board of Directors believes that Mr. Prince's executive experience and financial expertise qualify him to serve as a director of our company.
Douglas A. Roeder, age 46
Mr. Roeder was elected to our Board of Directors in December 2015. Mr. Roeder served on the Senseonics, Incorporated Board of Directors from October 2011 to December 2015. Mr. Roeder joined
Delphi Ventures as an Associate in 1998, and has been a Partner of Delphi Ventures since 2000, focusing on medical devices, diagnostics and biotechnology. Prior to joining Delphi Ventures, Mr. Roeder was an Associate with Alex, Brown & Sons Healthcare Investment Banking Group. Mr. Roeder currently serves on the Boards of Directors of Tandem Diabetes, Inc. and several private companies. Mr. Roeder previously served on the Board of Directors of TriVascular Technologies, Inc. from 2008 to 2016. Mr. Roeder received his A.B. from Dartmouth College. Our Board of Directors believes that Mr. Roeder's substantial experience with companies in the healthcare sector and his venture capital, financial and business experience qualify him to serve as a director of our company.
INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
INDEPENDENCE OF THE BOARD OF DIRECTORS
As required under the NYSE-MKT listing rules, a majority of the members of a listed company's board of directors must qualify as "independent," as affirmatively determined by the board of directors. Our Board of Directors consults with our counsel to ensure that its determinations are consistent with relevant securities and other laws and regulations regarding the definition of "independent," including those set forth in pertinent listing standards of NYSE-MKT, as in effect from time to time.
Our Board of Directors has undertaken a review of the independence of the directors and considered whether any director has a material relationship with us that could compromise his ability to exercise independent judgment in carrying out his responsibilities. As a result of this review, our Board of Directors has determined that Messrs. DeFalco, Fiorentino, Prince and Roeder and Drs. Barrett, Edelman and Klein, representing seven of our eight directors, are "independent directors" as defined under the listing rules of the NYSE-MKT. In making this determination, the Board of Directors found that none of these directors or nominees for director had a material or other disqualifying relationship with us. Dr. Goodnow is not an independent director by virtue of his employment with us as our President and Chief Executive Officer.
BOARD OF DIRECTORS LEADERSHIP STRUCTURE
Mr. DeFalco is the Chairman of the Board of Directors and has authority, among other things, to call and preside over Board meetings, including meetings of the independent directors, to set meeting agendas and to determine materials to be distributed to the Board of Directors. Accordingly, the Chairman of the Board has substantial ability to shape the work of the Board of Directors. We believe that separating the positions of Chairman and Chief Executive Officer creates an environment that is more conducive to objective evaluation and oversight of management's performance, increasing management accountability and improving the ability of the Board of Directors to monitor whether management's actions are in the best interests of us and our stockholders. We believe that this separation can enhance the effectiveness of the Board of Directors as a whole.
ROLE OF THE BOARD OF DIRECTORS IN RISK OVERSIGHT
One of the key functions of the Board of Directors is informed oversight of our risk management process. The Board of Directors does not have a standing risk management committee, but rather administers this oversight function directly through the Board of Directors as a whole, as well as through various standing committees that address risks inherent in their respective areas of oversight. In particular, our Board of Directors is responsible for monitoring and assessing strategic risk exposure, including a determination of the nature and level of risk appropriate for us. Our Audit Committee has the responsibility to consider and discuss our major financial risk exposures and the steps our management has taken to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. The Audit Committee also monitors compliance with legal and regulatory requirements. Our Nominating and Corporate
Governance Committee monitors the effectiveness of our corporate governance principles, including whether they are successful in preventing illegal or improper liability-creating conduct. Our Compensation Committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking. It is the responsibility of the committee chairs to report findings regarding material risk exposures to the Board of Directors as quickly as possible. The Board of Directors has delegated to the Chairman of the Board of Directors the responsibility of coordinating between the Board of Directors and management with regard to the determination and implementation of responses to any problematic risk management issues.
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors met six times during the last fiscal year. Each director attended 75% or more of the aggregate number of meetings of the Board of Directors and of the committees on which he served, held during the portion of the last fiscal year for which he was a director or committee member.
As required under applicable NYSE-MKT listing standards, during the last fiscal year, our independent directors met five times in regularly scheduled executive sessions at which only independent directors were present. Mr. DeFalco, the Chairman of our Board of Directors, presided over the executive sessions.
INFORMATION REGARDING COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has three committees: an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. The following table provides membership and meeting information for the year ended December 31, 2016 for each of the committees:
Name | Audit Committee | Compensation Committee | Nominating & Corporate Governance Committee | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
Stephen P. DeFalco | X | * | ||||||||
M. James Barrett | X | |||||||||
Steven Edelman(1) | X | |||||||||
Edward J. Fiorentino | X | X | ||||||||
Peter Justin Klein | X | X | ||||||||
Douglas S. Prince | X | * | X | |||||||
Douglas A. Roeder | X | * | X | |||||||
Number of meetings in 2016 | 6 | 3 | 1 | |||||||
(1)Joined committee in September 2016.*Committee chair.
Below is a description of each committee of the Board of Directors. Each of the committees has authority to engage legal counsel or other experts or consultants, as it deems appropriate to carry out its responsibilities.
Audit Committee
The Audit Committee of the Board of Directors was established by the Board of Directors in accordance with Section 3(a)(58)(A) of the Exchange Act to oversee our corporate accounting and financial reporting processes and audits of its financial statements. For this purpose, the Audit Committee performs several functions. The Audit Committee evaluates the performance of and assesses the qualifications of the independent auditors; determines and approves the engagement of the
independent auditors; determines whether to retain or terminate the existing independent auditors or to appoint and engage new independent auditors; reviews and approves the retention of the independent auditors to perform any proposed permissible non-audit services; monitors the rotation of partners of the independent auditors on our audit engagement team as required by law; reviews and approves or rejects transactions between us and any related persons; confers with management and the independent auditors regarding the effectiveness of internal control over financial reporting; establishes procedures, as required under applicable law, for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters and the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters; and meets to review our annual audited financial statements and quarterly financial statements with management and the independent auditor, including a review of our disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our periodic filings.
The Audit Committee is composed of three directors: Mr. Prince, Dr. Klein and Mr. Fiorentino. The Audit Committee met six times during 2016. The Board of Directors has adopted a written Audit Committee charter that is available to stockholders on our website at www.senseonics.com.
The Board of Directors reviews the NYSE-MKT listing standards definition of independence for Audit Committee members on an annual basis and has determined that all members of our Audit Committee are independent (as independence is currently defined in Section 803B of the NYSE-MKT Company Guide and under Rule 10A-3 under the Exchange Act).
The Board of Directors has also determined that Mr. Prince qualifies as an "audit committee financial expert," as defined in applicable SEC rules. The Board of Directors made a qualitative assessment of Mr. Prince's level of knowledge and experience based on a number of factors, including his formal education and experience as a chief financial officer for public reporting companies.
Report of the Audit Committee of the Board of Directors
The Audit Committee has reviewed and discussed the audited financial statements for the fiscal year ended December 31, 2016 with management of the Company. The Audit Committee has discussed with the independent registered public accounting firm the matters required to be discussed by Auditing Standard No. 1301, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board ("PCAOB"). The Audit Committee has also received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the PCAOB regarding the independent accountants' communications with the Audit Committee concerning independence, and has discussed with the independent registered public accounting firm the accounting firm's independence. Based on the foregoing, the Audit Committee has recommended to the Board of Directors that the audited financial statements be included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2016.
Douglas S. Prince, ChairEdward J. FiorentinoPeter Justin Klein
*The material in this report is not "soliciting material," is not deemed "filed" with the Commission and is not to be incorporated by reference in any filing of the Company under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
Compensation Committee
The Compensation Committee is composed of three directors: Mr. Roeder, Dr. Klein and Mr. Fiorentino. All members of our Compensation Committee are independent, as independence is currently defined in Section 805 of the NYSE-MKT Company Guide. The Compensation Committee met three times during the fiscal year. The Board of Directors has adopted a written Compensation Committee charter that is available to stockholders on our website at www.senseonics.com.
The Compensation Committee of the Board of Directors acts on behalf of the Board of Directors to review, adopt and oversee our compensation strategy, policies, plans and programs, including:
•establishment of corporate and individual performance objectives relevant to the compensation of our executive officers and members of senior management and evaluation of performance in light of these stated objectives;•review and approval of the compensation and other terms of employment or service, including severance and change-in-control arrangements, of our Chief Executive Officer and the other executive officers;•compensation of our non-employee directors; and•administration of our equity compensation plans and similar plans or programs.
Typically, the Compensation Committee meets quarterly and with greater frequency if necessary. The agenda for each meeting is usually developed by the Chair of the Compensation Committee, in consultation with our Chief Executive Officer. The Compensation Committee meets regularly in executive session. However,purchasers from time to time various membersparty thereto, the “Note Purchasers”) and Alter Domus (US) LLC, as collateral agent, pursuant to which we borrowed $35.0 million in aggregate principal through the issuance and sale of management and other employees as well as outside advisors or consultants may be invited by the Compensation Committee to make presentations, to provide financial or other background information or advice or to otherwise participate in Compensation Committee meetings. The Chief Executive Officer may not participate in, or be present during, any deliberations or determinations of the Compensation Committee regarding his compensation or individual performance objectives. The charter of the Compensation Committee grants the Compensation Committee full access to allSenior Secured Convertible Notes (the “PHC Notes”) on August 14, 2020. We also issued 2,914,176 shares of our books, records, facilitiescommon stock to PHC on August 14, 2020 as a financing fee.
During the past fiscal year, after taking into consideration the six factors prescribed by the SEC and NYSE-MKT described above, the Compensation Committee engaged Towers Watson as compensation consultants. The Compensation Committee has assessed Towers Watson's independence and determined that Towers Watson had no conflicts of interest in connection with its provisions of services to the Compensation Committee. Specifically, the Compensation Committee engaged Towers Watson to suggest a peer company group composed of public companies comparable to us and conduct an executive compensation assessment analyzing the current cash and equity compensation of our executive officers, directors and other senior management against compensation for similarly situated
executives at our peer group companies. Our management did not have the ability to direct Towers Watson's work.
Historically, the Compensation Committee has made most of the significant adjustments to annual compensation, determined bonus and equity awards and established new performance objectives at one or more meetings held during the first quarter of the year. The Compensation Committee also considers matters related to individual compensation, such as compensation for new executive hires, as well as high-level strategic issues, such as the efficacy of our compensation strategy, potential modifications to that strategy and new trends, plans or approaches to compensation, at various meetings throughout the year. Generally, the Compensation Committee's process comprises two related elements: the determination of compensation levels and the establishment of performance objectives for the current year. For executives other than the Chief Executive Officer, the Compensation Committee solicits and considers evaluations and recommendations submitted to the Compensation Committee by the Chief Executive Officer. In the case of the Chief Executive Officer, the evaluation of his performance is conducted by the Compensation Committee, which determines any adjustments to his compensation as well as awards to be granted. For all executives and directors as part of its deliberations, the Compensation Committee may review and consider, as appropriate, materials such as financial reports and projections, operational data, tax and accounting information, tally sheets that set forth the total compensation that may become payable to executives in various hypothetical scenarios, executive and director stock ownership information, stock performance data, analyses of historical executive compensation levels and current compensation levels and recommendations of the Compensation Committee's compensation consultant, including analyses of executive and director compensation paid at other companies identified by the consultant to be comparable to us.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee of the Board of Directors is responsible for identifying, reviewing and evaluating candidates to serve as our directors (consistent with criteria approved by the Board of Directors), reviewing and evaluating incumbent directors, recommending to the Board of Directors for selection candidates for election to the Board of Directors, making recommendations to the Board of Directors regarding the membership of the committees of the Board of Directors, and assessing the performance of management and the Board of Directors.
The Nominating and Corporate Governance Committee is composed of five directors: Messrs. DeFalco, Prince and Roeder and Drs. Barrett and Edelman. All members of the Nominating and Corporate Governance Committee are independent (as independence is currently defined in Section 803A of the NYSE-MKT Company Guide). The Nominating and Corporate Governance Committee met one time during 2016. The Board of Directors has adopted a written Nominating and Corporate Governance Committee charter that is available to stockholders on our website and www.senseonics.com.
The Nominating and Corporate Governance Committee believes that candidates for director should have certain minimum qualifications, including the ability to read and understand basic financial statements, being over 21 years of age and having the highest personal integrity and ethics. The Nominating and Corporate Governance Committee also intends to consider such factors as possessing relevant expertise upon which to be able to offer advice and guidance to management, having sufficient time to devote to our affairs, demonstrated excellence in his or her field, having the ability to exercise sound business judgment and having the commitment to rigorously represent the long-term interests of our stockholders. However, the Nominating and Corporate Governance Committee retains the right to modify these qualifications from time to time. Candidates for director nominees are reviewed in the context of the current composition of the Board of Directors, our operating requirements and the long-term interests of stockholders. In conducting this assessment, the Nominating and Corporate Governance Committee typically considers diversity, age, skills and such other factors as it deems
appropriate, given the current needs of us and the Board of Directors, to maintain a balance of knowledge, experience and capability.
In the case of incumbent directors whose terms of office are set to expire, the Nominating and Corporate Governance Committee reviews these directors' overall service to us during their terms, including the number of meetings attended, level of participation, quality of performance and any other relationships and transactions that might impair the directors' independence. The Nominating and Corporate Governance Committee also takes into account the results of the self-evaluation of the Board of Directors, conducted annually on a group and individual basis. In the case of new director candidates, the Nominating and Corporate Governance Committee also determines whether the nominee is independent for NYSE-MKT purposes, which determination is based upon applicable NYSE-MKT listing standards, applicable SEC rules and regulations and the advice of counsel, if necessary. The Nominating and Corporate Governance Committee then uses its network of contacts to compile a list of potential candidates, but may also engage, if it deems appropriate, a professional search firm. The Nominating and Corporate Governance Committee conducts any appropriate and necessary inquiries into the backgrounds and qualifications of possible candidates after considering the function and needs of the Board of Directors. The Nominating and Corporate Governance Committee meets to discuss and consider the candidates' qualifications and then selects a nominee for recommendation to the Board of Directors by majority vote.
The Nominating and Corporate Governance Committee will consider director candidates recommended by stockholders. The Nominating and Corporate Governance Committee does not intend to alter the manner in which it evaluates candidates, including the minimum criteria set forth above, based on whether or not the candidate was recommended by a stockholder. Stockholders who wish to recommend individuals for consideration by the Nominating and Corporate Governance Committee to become nominees for election to the Board of Directors may do so by delivering a written recommendation to the Nominating and Corporate Governance Committee in care of our Corporate Secretary at 20451 Seneca Meadows Parkway, Germantown, Maryland 20876-7005. Any such recommendation should be delivered at least 12091 days prior to the anniversary datematurity of the mailingSecond Lien Notes. The obligations under the PHC Notes are secured by substantially all of our proxy statement forand our subsidiary’s assets.
the descriptions contained in our Current
The Board of Directors has adopted a formal process by which stockholders may communicate
These communicationsPHC Notes. We expect that we will be reviewed byneed to raise additional capital in the future, likely before April 30, 2022. If our Corporate Secretary, who will determine whether they should be presented tostock price at such time is below the Board of Directors. The purpose of this screening is to allow the Board of Directors to avoid having to consider communications that contain advertisements or solicitations or are unduly hostile, threatening or similarly inappropriate. All communications directed to the Audit Committee in accordance with our Amended and Restated Whistleblower Policy that
relate to questionable accounting or auditing matters involving us will be promptly and directly forwarded to the Audit Committee.
Any interested person may communicate directly with the non-management directors. Persons interested in communicating directly with the non-management directors regarding their concerns or issues may do so by addressing correspondence to a particular director, or to the non-management directors generally, in care of Senseonics Holdings, Inc., 20451 Seneca Meadows Parkway, Germantown, Maryland 20876-7005. If no particular director is named, letters will be forwarded, depending upon the subject matter, to the chairconversion prices of the Audit, Compensation, or Nominating and Corporate Governance Committee.
CODE OF ETHICS
WePHC Notes at a time that we need to raise additional capital, this limitation could have adopted an Amended and Restated Code of Business Conduct and Ethics, or the Code of Conduct, applicable to all of our employees, executive officers and directors. The Code of Conduct is availablea material adverse effect on our websiteability to raise such capital on favorable terms or at www.senseonics.com. The Audit Committee of our Board of Directors is responsible for overseeingall. As a result, the Code of Conduct and mustfailure to approve any waivers of the Code of Conduct for executive officers and directors. If we make any substantive amendments to the Code of Conduct or grant any waiver fromthis proposal could have a provision of the Code of Conduct to any executive officer or director, we will promptly disclose the amendment or waivermaterial adverse effect on our website.
PROPOSAL NO. 2RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Audit Committee of the Board of Directors has selected Ernst & Young LLP asfuture liquidity and our independent registered public accounting firm for the fiscal year ending December 31, 2017 and has further directed that management submit the selection of its independent registered public accounting firm for ratification by the stockholders at the Annual Meeting. Ernst & Young LLP has audited our financial statements beginning with the year ended December 31, 2015. Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting. They will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.
Neither our bylaws nor other governing documents or law require stockholder ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm. However, the Audit Committee of the Board of Directors is submitting the selection of Ernst & Young LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the Audit Committee of the Board of Directors will reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee of the Board of Directors in its discretion may direct the appointment of different independent auditors at any time during the year if they determine that such a change would be in our or our stockholders' best interests.
operations.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table represents aggregate fees billed to us for the fiscal years ended December 31, 2016 and 2015 by our principal accountants. All such fees described below were approved by the Audit Committee.
| | 2016 | 2015 | |||||
|---|---|---|---|---|---|---|---|
Audit fees | $ | 860,689 | $ | 378,752 | |||
Tax Fees | 18,500 | (1) | 25,000 | (1) | |||
| | | | | | | | |
Total | $ | 879,189 | $ | 403,752 | |||
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
(1)Tax fees were principally for services related to tax compliance and reporting and analysis services.
PRE-APPROVAL POLICIES AND PROCEDURES
Our Audit Committee has adopted a policy and procedures for the pre-approval of audit and, if applicable, non-audit services rendered by our independent registered public accounting firm, Ernst & Young LLP. The policy generally pre-approves specified services in the defined categories of audit services, audit-related services, and tax services up to specified amounts. Pre-approval may also be given as part of the Audit Committee's approval of the scope of the engagement of the independent registered public accounting firm or on an individual explicit case-by-case basis before the independent registered public accounting firm is engaged to provide each service. On a periodic basis, the independent registered public accounting firm reports to the Audit Committee on the status of actual costs for approved services against the approved amounts.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE "“FOR"” PROPOSAL NO. 2.1
The following table sets forth information concerning our executive officers.
9 PROPOSAL NO. 2 APPROVAL OF INCREASE IN NUMBER OF AUTHORIZED SHARES OF COMMON STOCK | ||
|---|---|---|
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following sets forth certain information with respectBoard of Directors is requesting stockholder approval of an amendment to our executive officers whoAmended and Restated Certificate of Incorporation to increase our authorized number of shares of common stock from 450,000,000 shares to 900,000,000 shares.
R. Don Elseyconvertible into up to 76,470,588 shares of our common stock, subject to specified anti-dilution adjustments, including adjustments for our issuance of equity securities on or prior to April 30, 2022 below the conversion price of the PHC Notes.
Mr. Elsey was appointed asMasters or their assignees have the option to purchase up to an additional 27,000 shares of Series A Preferred Stock at a price of $1,000 per share, subject to the terms and conditions of the Stock Purchase Agreement, upon the later November 12, 2020 or the date 10 days after we receive stockholder approval to increase our Chief Financial Officerauthorized common stock by an amount sufficient to permit conversions of the Series A Preferred Stock, but in any event no later than January 11, 2021, and subject to specified conditions. If we were to issue such additional shares of Series A Preferred Stock, the shares would be convertible into an aggregate of 56,722,689 shares of common stock.
Incorporation.
Dr. Jain was appointed as our Chief Operating Officer in January 2017. Dr. Jain previously served as our Vice President Operations, Quality and Regulatory from December 2015 to January 2017. Dr. Jain served as Senior Director, Quality and Regulatory of Senseonics, Incorporated from January 2012 to January 2014 and as Vice President Operations, Quality and Regulatory of Senseonics, Incorporated from January 2014 to December 2015. Prior to that, Dr. Jain held various positions at Medtronic, Inc., a medical technology and services company, from 1999 to January 2012, most recently as a senior program manager. Dr. Jain received his M.B.A. from the University of Minnesota, Carlson School of Management, his Ph.D. in chemical engineering from the University of South Carolina and his B.Tech. from the Indian Institute of Technology, Kanpur.
Mirasol Panlilio., age 52
Ms. Panlilio was appointed as our Vice President, Global Sales and Marketing in December 2015. Ms. Panlilio served as the Vice President, Global Sales and Marketing of Senseonics, Incorporated from June 2014 to December 2015. Prior to joining Senseonics, Incorporated, Ms. Panlilio served as Vice President, Global Marketing and Sales at Viveve, Inc. from October 2012 to May 2014, an Independent Marketing Consultant at MGP Retail Consulting, LLC from May 2011 to June 2014, Vice President of
Sales and Marketing for Arkal Medical, Inc. from 2010 to May 2011 and Vice President of Marketing and Sales at VeraLight, Inc. from 2007 to 2010. From 2003 to 2007, Ms. Panlilio worked at Abbott Diabetes Care. Ms. Panlilio received her B.S. in business administration from San Jose State University.
Dr. Kelley was appointed as our Chief Medical Officer in January 2016. From January 2011 to January 2016, Dr. Kelley was the World Wide Vice President of Medical Affairs Medical Surgical Systems of Becton, Dickinson & Company. Prior to that, Dr. Kelley was the Vice President Medical Director for Kimberly Clark from November 2007 to December 2010. From 2005 to 2007, Dr. Kelley served as the medical director for the peripheral interventions and vascular surgery business of Boston Scientific. Before her assignment with Boston Scientific, Dr. Kelley was an assistant professor of vascular surgery and radiology at Yale University from 2003 to 2005. Dr. Kelley is a board certified general and vascular surgeon. Dr. Kelley received her M.D. from Dartmouth Medical School and her B.A. in Biology from Boston University.
| Name of Beneficial Owner | | | Number of Shares Beneficially Owned | | | Percentage of Shares Beneficially Owned | | ||||||
| Principal Stockholders: | | | | | | | | | | | | | |
Entities affiliated with New Enterprise Associates, Inc.(1) | | | | | 19,142,350 | | | | | | 8.2% | | |
Roche Finance Ltd.(2) | | | | | 29,319,010 | | | | | | 12.7 | | |
Entities affiliated with Robert J. Smith(3) | | | | | 19,716,139 | | | | | | 8.6 | | |
Gilder, Gagnon, Howe & Co. LLC(4) | | | | | 15,780,806 | | | | | | 6.8 | | |
Entities affiliated with Wellington Management Group LLP(5) | | | | | 13,357,466 | | | | | | 5.8 | | |
Entities affiliated with Highbridge Capital Management, LLC(6) | | | | | 25,250,000 | | | | | | 9.9 | | |
| Named Executive Officers and Directors: | | | | | | | | | | | | | |
Timothy T. Goodnow, Ph.D.(7) | | | | | 2,669,487 | | | | | | 1.1 | | |
Francine R. Kaufman, M.D.(8) | | | | | 183,334 | | | | | | * | | |
Mukul Jain, Ph.D.(9) | | | | | 1,600,297 | | | | | | * | | |
| Jon D. Isaacson | | | | | — | | | | | | — | | |
Peter Justin Klein, M.D., J.D.(10) | | | | | 377,520 | | | | | | * | | |
Stephen P. DeFalco(11) | | | | | 1,141,231 | | | | | | * | | |
Edward J. Fiorentino(12) | | | | | 489,713 | | | | | | * | | |
Douglas S. Prince(13) | | | | | 450,049 | | | | | | * | | |
Douglas A. Roeder(14) | | | | | 10,167,517 | | | | | | 4.4 | | |
Steven Edelman, M.D.(15) | | | | | 438,030 | | | | | | * | | |
All current directors and executive officers as a group (10 persons)(16) | | | | | 17,517,178 | | | | | | 7.4 | | |
Name of Beneficial Owner | Number of Shares Beneficially Owned | Percentage of Shares Beneficially Owned | |||||
|---|---|---|---|---|---|---|---|
Principal Stockholders: | |||||||
Entities affiliated with New Enterprise Associates, Inc.(1) | 28,223,900 | 29.4 | % | ||||
Entities affiliated with Delphi Ventures(2) | 11,346,946 | 12.1 | |||||
Roche Finance Ltd.(3) | 8,042,414 | 8.5 | |||||
Energy Capital, LLC(4) | 7,964,810 | 8.5 | |||||
SBLE, LLC(5) | 5,907,196 | 6.3 | |||||
Named Executive Officers and Directors: | |||||||
Timothy T. Goodnow, Ph.D.(6) | 3,441,310 | 3.5 | |||||
R. Don Elsey(7) | 529,164 | * | |||||
Lynne E. Kelley(7) | 119,998 | * | |||||
M. James Barrett, Ph.D.(8) | 16,599,818 | 17.4 | |||||
Peter Justin Klein, M.D., J.D.(9) | 61,312 | * | |||||
Stephen P. DeFalco(10) | 753,154 | * | |||||
Edward J. Fiorentino(7) | 138,529 | * | |||||
Douglas S. Prince(7) | 138,529 | * | |||||
Douglas A. Roeder(11) | 11,401,575 | 12.1 | |||||
Steven Edelman, M.D.(7) | 21,022 | * | |||||
All current directors and executive officers as a group (12 persons)(12) | 34,286,197 | 34.1 | |||||
*
*- Represents beneficial ownership of less than 1%.
share voting and dispositive power over, and be the indirect beneficial owners of, the shares held by NEA 10. The shares held by NEA 9 are indirectly held by NEA Partners 9, Limited Partnership, or Partners 9, the sole general partner of NEA 9. The individual general partner of Partners
10 and (e) and 54,629 shares of common stock underlying options that are exercisable within 60 days of March 31, 2017.
(9)- June 30, 2020.
To our knowledge, based solely upon a review of Forms 3 and 4 and amendments thereto furnished to us and written representations provided to us by all of our directors and executive officers and certain of our more than 10% stockholders, we believe that during the year ended December 31, 2016, our directors, executive officers and more than 10% stockholders complied with all applicable Section 16(a) filing requirements.
On December 4, 2015, we entered into a merger agreement with Senseonics, Incorporated and SMSI Merger Sub, Inc.Delphi Ventures VIII, L.P., or Delphi VIII, (b) 94,569 shares of common stock held by Delphi BioInvestments VIII, L.P., or Delphi Bio, and (c) 321,223 shares of common stock underlying options that are held by Douglas Roeder and are exercisable within 60 days of June 30, 2020. Delphi Management Partners VIII, L.L.C., or DMP VIII, is the Merger Agreement, to acquire Senseonics, Incorporated. The transactions contemplated by the Merger Agreement were consummated on December 7, 2015,general partner of each of Delphi VIII and Delphi Bio, collectively referred to herein as the Acquisition. All sharesDelphi VIII Funds. Mr. Roeder is a Managing Member of Senseonics, Incorporated common stock converted into shares of our common stock,DMP VIII and all Senseonics, Incorporated options converted into our options, in connection with the closing of the Acquisition. Themay be deemed to share voting and per share information included in this "Executive Compensation" section gives effect to the conversion of such shares and options in the Acquisition and related adjustments to the number of shares and the exercise price. The Summary Compensation Table and the Narrative to Summary Compensation Table below reflect compensation earned by our named executive officers for their service to Senseonics, Incorporated from January 1, 2015 to December 7, 2015, the date of the closing of the Acquisition, and for their service to Senseonics Holdings, Inc. beginning on December 7, 2015.
Our Chief Executive Officer and our two other most highly compensated executive officers for the year ended December 31, 2016 were:
•Timothy T. Goodnow, Ph.D., President and Chief Executive Officer;•R. Don Elsey, Chief Financial Officer; and•Lynne E. Kelley, M.D., FACS Chief Medical Officer.
We refer to these executive officers in this proxy statement as our named executive officers.
Summary Compensation Table
The following table presents the compensation awarded to, earned by or paid to each of our named executive officers for the years ended December 31, 2016 and 2015.
Name and Principal Position | Year | Salary ($) | Option Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | Total ($) | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Timothy T. Goodnow | 2016 | 475,998 | 586,871 | 318,150 | 1,381,019 | |||||||||||
President and Chief Executive Officer | 2015 | 365,791 | 231,704 | 152,718 | 750,213 | |||||||||||
R. Don Elsey(3) | 2016 | 355,625 | 472,275 | 153,300 | 981,200 | |||||||||||
Chief Financial Officer | 2015 | 286,667 | 141,229 | 85,577 | 513,473 | |||||||||||
Lynne E. Kelley(4) | 2016 | 365,000 | 565,507 | 134,138 | 1,064,645 | |||||||||||
Chief Medical Officer | ||||||||||||||||
(1)The amounts include the full grant date fair value for awards granted during the indicated year. The grant date fair value was computed in accordance with ASC Topic 718, Compensation—Stock Compensation. Unlike the calculations contained in our audited consolidated financial statements, this calculation does not give effect to any estimate of forfeitures related to service-based vesting, but assumes that the executive will perform the requisite service for the award to vest in full. The assumptions we used in valuing options are described in Note 10 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016.(2)The amounts reflect bonus paid on the achievement of specified corporate goals, as discussed further below under "—Narrative to Summary Compensation Table—Annual Bonus."(3)Mr. Elsey became an executive officer of Senseonics, Incorporated in February 2015 and amounts represent compensation earned since that date.
(4)Ms. Kelley became an executive officer of Senseonics, Incorporated in January 2016 and amounts represent compensation earned since that date.
Narrative to Summary Compensation Table
We review compensation annually for all employees, including our named executive officers. In setting executive base salaries and bonuses and granting equity incentive awards, we consider compensation for comparable positions in the market, the historical compensation levels of our executives, individual performance as compared to our expectations and objectives, our desire to motivate our employees to achieve short- and long-term results that are in the best interests of our stockholders, and a long-term commitment to our company. We do not target a specific competitive position or a specific mix of compensation among base salary, bonus or long-term incentives.
Our Compensation Committee has historically determined our executives' compensation. Our Compensation Committee typically reviews and discusses management's proposed compensation with the chief executive officer for all executives other than the chief executive officer. Based on those discussions and its discretion, our Compensation Committee then approves the compensation of each executive officer after discussions without members of management present.
Our Compensation Committee has engaged Towers Watson, a compensation consultant, and reviewed Towers Watson's compensation data for executives at similarly sized medical device companies when determining executive compensation.
Annual Base Salary
Senseonics, Incorporated entered into employment agreements with each of its named executive officers that establish their base salaries and target bonus opportunities. In connection with the Acquisition, we assumed those employment agreements. The base salaries will be reviewed periodically by our Compensation Committee. The following table presents the annual base salaries for each of our named executive officers for 2015, 2016 and 2017. The 2015 base salaries became effective on January 1, 2015, the 2016 base salaries became effective on March 16, 2016, and the 2017 base salaries became effective on January 1, 2017 for all of the named executive officers.
Name | 2015 Base Salary ($) | 2016 Base Salary ($) | 2017 Base Salary ($) | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
Timothy T. Goodnow | 365,791 | 505,000 | 520,000 | |||||||
R. Don Elsey | 320,000 | 365,000 | 376,000 | |||||||
Lynne E. Kelley | N/A | 365,000 | 370,000 | |||||||
Annual Bonus
We seek to motivate and reward our executives for achievements relative to our corporate goals and expectations for each fiscal year. Each named executive officer has a target bonus opportunity, defined as a percentage of his or her annual salary. The following table presents the annual target
bonus opportunity, as a percentage of annual base salary, for each of our named executive officers for 2015, 2016 and 2017.
Name | Target Bonus (as a % of Base Salary) (%) 2015 | Target Bonus (as a % of Base Salary) (%) 2016 | Target Bonus (as a % of Base Salary) (%) 2017 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
Timothy T. Goodnow | 50 | 60 | 75 | |||||||
R. Don Elsey | 35 | 40 | 50 | |||||||
Lynne E. Kelley | N/A | 35 | 35 | |||||||
For 2015, bonuses were based on Senseonics, Incorporated's achievement of specified corporate goals, including completing enrollment in the European pivotal clinical trial, receiving IDE approval for the U.S. pivotal clinical trial, obtaining CE Mark approval for Eversense, commercializing Eversense in at least one European market and completing a successful surveillance audit. Based on the level of achievement, the Senseonics, Incorporated Compensation Committee awarded Dr. Goodnow and Mr. Elsey 84% of their target bonuses based on their 2015 base salary, respectively.
For 2016, bonuses were based on our achievement of specified corporate goals, including submitting regulatory approval documents related to our U.S. clinical trial, increasing manufacturing capacity, completing the enrollment of our U.S. pivotal clinical trial, demonstrating an increase in sensor manufacturing capacity, completing development of the second generation transmitter, launching Eversense in multiple European markets, completing a successful surveillance audit, and managing the total spend of the organization within the approved budget. Based on the level of achievement, our Compensation Committee awarded each of Dr. Goodnow, Mr. Elsey and Dr. Kelley 105% of their target bonuses based on their 2016 base salary.
These actual bonus amounts are reflected in the "Non-Equity Incentive Plan Compensation" column of the Summary Compensation Table above.
Long-Term Incentives
Our 1997 stock option plan, or the 1997 plan, authorized us, and the amended and restated 2015 equity incentive plan, or the 2015 plan, authorizes us to make grants to eligible recipients of non-qualified stock options and incentive stock options.
We award stock options on the date the Compensation Committee approves the grant. We set the option exercise price and grant date fair value based on its per-share valuation on the date of grant.
In July 2015, the Senseonics, Incorporated Board of Directors awarded to Dr. Goodnow and Mr. Elsey options to purchase 220,237 and 134,240 shares of our common stock, respectively. Each of these options was originally issued with an exercise price of $1.95 per share.
In April 2016, our Board of Directors awarded Dr. Kelley an option to purchase 334,996 shares of our common stock, with an exercise price of $2.97 per share. 83,750 shares underlying this option vested on January 4, 2017, and the remainder ofdispositive power over the shares vest in 36 equal monthly installments through January 4, 2020. In April 2016, our Board of Directors also awarded to Dr. Goodnow and Mr. Elsey options to purchase 347,652 and 279,767 shares of our common stock, respectively. Each of these options was issued with an exercise price of $2.97 per share. The shares underlying the options granted to Dr. Goodnow and Mr. Elsey vest in 48 equal monthly installments. All shares subject to vesting under these option grants will vest in full and become immediately exercisable upon the closing of a change in control of our company.
Outstanding Equity Awards at End of 2016
The following table provides information about our outstanding options held by eachthe Delphi VIII Funds. This information has been obtained from a Schedule 13G/A filed on February 7, 2020 by Delphi VIII, Delphi Bio, DMP VIII, Douglas A. Roeder, James J. Bochnowski, David L. Douglass and Deepika R. Pakianathan.
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable(1) | Option Exercise Price ($) | Option Expiration Date | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Timothy T. Goodnow | 2,038,610 | — | 0.54 | 12/2/2020 | |||||||||
| 589,093 | — | 0.54 | 2/28/2021 | ||||||||||
| 267,734 | 196,640 | (2) | 0.54 | 6/4/2024 | |||||||||
| 78,001 | 142,235 | (3) | 1.95 | 7/22/2025 | |||||||||
| 57,942 | 289,710 | (5) | 2.97 | 4/12/2026 | |||||||||
R. Don Elsey | 298,019 | 352,205 | (4) | 0.54 | 12/4/2024 | ||||||||
| 47,453 | 86,787 | (3) | 1.95 | 7/22/2025 | |||||||||
| 46,628 | 233,139 | (5) | 2.97 | 4/12/2026 | |||||||||
Lynne E. Kelley | — | 334,996 | (6) | 2.97 | 4/12/2026 | ||||||||
(1)All shares subject to vesting under these options will vest in full and become immediately exercisable upon the closing of a change in control of our company.(2)The unvested shares underlying this option vest in 18 equal monthly installments, subject to the officer's continued service through each applicable vesting date.(3)The unvested shares underlying this option vest in 31 equal monthly installments, subject to the officer's continued service through each applicable vesting date.(4)The unvested shares underlying this option vest in 26 equal monthly installments, subject to the officer's continued service through each applicable vesting date.(5)The unvested shares underlying this option vest in 40 equal monthly installments, subject to the officer's continued service through each applicable vesting date.(6)The unvested shares underlying this option vest as to 25% of the shares in January 2017 and the remaining shares vest in 36 equal monthly installments, subject to the officers continued service through each applicable vesting date.
Employment Agreements
Below are descriptions of employment agreements that our named executive officers entered into with us or Senseonics, Incorporated. We assumed the employment agreements with Dr. Goodnow and Mr. Elsey in connection with the Acquisition.
Agreement with Dr. Goodnow
In July 2015, Senseonics, Incorporated entered into an amended and restated employment agreement with Dr. Goodnow that governs the terms of his employment with us. Pursuant to the agreement, Dr. Goodnow was originally entitled to an annual base salary of $365,791 and was originally eligible to receive an annual performance bonus of up to 50% of his base salary, as determined by our Board of Directors. If Dr. Goodnow's employment is terminated by us for reasons other than for cause or if he resigns for good reason (each as defined in his employment agreement), he would be entitled to receive severance payments equal to continued payment of his base salary for 18 months, 100% of
his target bonus, employee benefit coverage for up to 18 months, and reimbursement of expenses owed to him through the date of his termination. If Dr. Goodnow's employment is terminated by us other than for cause or if he resigns for good reason, coincident with a change in control (as defined in his employment agreement), he would be entitled to the benefits described above, although he would be entitled to 150%, rather than 100%, of his target bonus, and 50% of his then unvested equity awards would become fully vested. Additionally, if Dr. Goodnow's employment is terminated by us or any successor entity without cause within 12 months following a change in control, then 100% of his then unvested equity awards shall become fully vested.
Agreement with Mr. Elsey
In July 2015, Senseonics, Incorporated entered into an amended and restated employment agreement with Mr. Elsey that governs the terms of his employment with us. Pursuant to the agreement, Mr. Elsey was originally entitled to an annual base salary of $320,000 and was originally eligible to receive an annual performance bonus of up to 35% of his base salary, as determined by our Board of Directors. If Mr. Elsey's employment is terminated by us for reasons other than for cause or if he resigns for good reason (each as defined in his employment agreement), he would be entitled to receive severance payments equal to continued payment of his base salary for one year, a prorated portion of his target bonus for the year in which his service is terminated, employee benefit coverage for up to one year, and reimbursement of expenses owed to him through the date of his termination. If Mr. Elsey's employment is terminated by us other than for cause or if he resigns for good reason, coincident with a change in control (as defined in his employment agreement), he would be entitled to the benefits described above, although in lieu of the bonus described above, he would be entitled to 125% of his target bonus, and 50% of his then unvested equity awards would become fully vested. Additionally, if Mr. Elsey's employment is terminated by us or any successor entity without cause within 12 months following a change in control, then 100% of his then unvested equity awards shall become fully vested.
Agreement with Dr. Kelley
In April 2016, we entered into an employment agreement with Dr. Kelley that governs the terms of her employment with us. Pursuant to the agreement, Dr. Kelley was originally entitled to an annual base salary of $365,000 and was originally eligible to receive an annual performance bonus of up to 35% of her base salary, as determined by our Board of Directors. If Dr. Kelley's employment is terminated by us for reasons other than for cause or if she resigns for good reason (each as defined in her employment agreement), she would be entitled to receive severance payments equal to continued payment of her base salary for nine months, a prorated portion of her target bonus for the year in which her service is terminated, employee benefit coverage for up to nine months, and reimbursement of expenses owed to her through the date of her termination. If Dr. Kelley's employment is terminated by us other than for cause or if she resigns for good reason, coincident with a change in control (as defined in her employment agreement), she would be entitled to the benefits described above, although in lieu of the bonus described above, she would be entitled to the larger of 75% of her target bonus or her pro rata portion of her target bonus. Additionally, if Dr. Kelley's employment is terminated by us or any successor entity without cause within 12 months following a change in control, then 100% of her then unvested equity awards shall become fully vested.
401(k) Plan
We maintain a defined contribution employee retirement plan for our employees. Our 401(k) plan is intended to qualify as a tax-qualified plan under Section 401 of the Internal Revenue Code so that contributions to our 401(k) plan, and income earned on such contributions, are not taxable to participants until withdrawn or distributed from the 401(k) plan. Our 401(k) plan provides that each participant may contribute a portion of his or her pre-tax compensation, up to the statutory limit. Under our 401(k) plan, each employee is fully vested in his or her deferred salary contributions. Employee contributions are held and invested by the plan's trustee, subject to participants' ability to give investment directions by following specified procedures. We do not currently make discretionary contributions or matching contributions to our 401(k) plan.
Equity Incentive Plans
2015 Equity Incentive Plan
The Senseonics, Incorporated Board of Directors adopted our 2015 plan on December 1, 2015, and the Senseonics, Incorporated stockholders subsequently approved the 2015 plan on December 4, 2015. In connection with the Acquisition, we assumed the 2015 plan, including all awards that were then outstanding under the 2015 plan. In connection with our public offering, in February 2016, our Board of Directors adopted and our stockholders approved an Amended and Restated 2015 Equity Incentive Plan, or the amended and restated 2015 plan. The amended and restated 2015 plan became effective on March 17, 2016.
Authorized Shares
The number of(a) 76,837 shares of common stock that may be issued pursuant to equity awards under the 2015 plan was initially 839,000 shares. Pursuant to the amended and restated 2015 plan, which become effective upon the pricing of our public offering, the number of(b) 361,193 shares of common stock that may be issued pursuant to equity awards was initially up to 17,251,115 shares, representing 8,000,000 shares plus up to an additional 9,251,115 shares, in the event thatunderlying options that were outstanding under the 1997 plan asare exercisable within 60 days of February 16, 2016 expire or otherwise terminate without having been exercised (in such case, the shares not acquired will revert to and become available for issuance under the amended and restated 2015 plan). The numberJune 30, 2020.
Shares issued under our amended and restated 2015 plan may be authorized but unissued or reacquired shares of our common stock. Shares subject to stock awards granted under our amended and restated 2015 plan that expire or terminate without being exercised in full, or that are paid out in cash rather than in shares, will not reduce the number of shares available for issuance under our amended and restated 2015 plan. Additionally, shares issued pursuant to stock awards under our amended and restated 2015 plan that we repurchase or that are forfeited, as well as shares reacquired
by us as consideration for the exercise or purchase price of a stock award or to satisfy tax withholding obligations related to a stock award, will become available for future grant under our amended and restated 2015 plan.
Administration
Our Board of Directors, or a duly authorized committee thereof, has the authority to administer our amended and restated 2015 plan. Our Board of Directors has delegated its authority to administer our amended and restated 2015 plan to our Compensation Committee under the terms of the Compensation Committee's charter. Our Board of Directors may also delegate to one or more of our officers the authority to (i) designate employees other than officers to receive specified stock awards and (ii) determine the number of shares of our common stock to be subject to such stock awards. Subject to the terms of our amended and restated 2015 plan, the administrator has the authority to determine the terms of awards, including recipients, the exercise price or strike price of stock awards, if any, the number of shares subject to each stock award, the fair market value of a share of our common stock, the vesting schedule applicable to the awards, together with any vesting acceleration, the form of consideration, if any, payable upon exercise or settlement of the stock award and the terms and conditions of the award agreements for use under our amended and restated 2015 plan.
The administrator has the power to modify outstanding awards under our amended and restated 2015 plan. Subject to the terms of our amended and restated 2015 plan, the administrator has the authority to reprice any outstanding option or stock appreciation right, cancel and re-grant any outstanding option or stock appreciation right in exchange for new stock awards, cash or other consideration or take any other action that is treated as a repricing under GAAP with the consent of any adversely affected participant.
Section 162(m) Limits
No participant may be granted stock awards covering more than 1,000,000 shares of our common stock under our amended and restated 2015 plan during any calendar year pursuant to stock options, stock appreciation rights and other stock awards whose value is determined by reference to an increase over an exercise price or strike price of at least 100% of the fair market value of our common stock on the date of grant. Additionally, no participant may be granted in a calendar year a performance stock award covering more than 1,000,000 shares of our common stock or a performance cash award having a maximum value in excess of $3.0 million under our amended and restated 2015 plan. These limitations enable us to grant awards that will be exempt from the $1.0 million limitation on the income tax deductibility of compensation paid per covered executive officer imposed by Section 162(m) of the Code.
Performance Awards
Our amended and restated 2015 plan permits the grant of performance-based stock and cash awards that may qualify as performance-based compensation that is not subject to the $1.0 million limitation on the income tax deductibility of compensation paid per covered executive officer imposed by Section 162(m) of the Code. To enable us to grant performance-based awards that will qualify, our Compensation Committee can structure such awards so that the stock or cash will be issued or paid pursuant to such award only following the achievement of specified pre-established performance goals during a designated performance period.
Corporate Transactions
Our amended and restated 2015 plan provides that in the event of a specified corporate transaction, including without limitation a consolidation, merger or similar transaction involving our
company, the sale, lease or other disposition of all or substantially all of the assets of our company or the consolidated assets of our company and our subsidiaries, or a sale or disposition of at least 50% of the outstanding capital stock of our company, the administrator will determine how to treat each outstanding equity award. The administrator may:
•arrange for the assumption, continuation or substitution of a stock award by a successor corporation;•arrange for the assignment of any reacquisition or repurchase rights held by us to a successor corporation;•accelerate the vesting of the stock award and provide for its termination prior to the effective time of the corporate transaction;•arrange for the lapse, in whole or in part, of any reacquisition or repurchase right held by us; or•cancel the stock award prior to the transaction in exchange for a cash payment, which may be reduced by the exercise price payable in connection with the stock award.
The administrator is not obligated to treat all equity awards or portions of equity awards, even those that are of the same type, in the same manner. The administrator may take different actions with respect to the vested and unvested portions of an equity award.
Change of Control
The administrator may provide, in an individual award agreement or in any other written agreement between us and the participant, which the equity award will be subject to additional acceleration of vesting and exercisability in the event of a change of control. In the absence of such a provision, no such acceleration of the award will occur.
Plan Amendment or Termination
Our Board of Directors has the authority to amend, suspend or terminate our amended and restated 2015 plan, provided that such action does not materially impair the existing rights of any participant without such participant's written consent. No incentive stock options may be granted after the tenth anniversary of the date our Board of Directors adopted our amended and restated 2015 plan.
1997 Stock Option Plan
The Board of Directors and stockholders of Senseonics, Incorporated approved the 1997 plan, which became effective in March 1997, and it was further amended and restated by the Senseonics, Incorporated Board of Directors and stockholders most recently in June 2011. In connection with the Acquisition, we assumed the 1997 plan. As of December 31, 2016, there were outstanding stock options covering a total of 9,251,164 shares granted under the 1997 plan.
Upon the effectiveness of the 2015 Plan, we no longer grant awards under the 1997 plan.
Types of Awards. The 1997 plan provided for the grant of incentive stock options and nonqualified stock options. Nonqualified stock options may be granted to employees, including officers, non-employee directors and consultants of us and our affiliates. Incentive stock options may be granted only to employees.
Share Reserve. The aggregate number of shares of common stock reserved for issuance pursuant to stock options under the 1997 plan was 10,644,109 shares, less any shares issued as restricted stock, which was also the maximum number of shares that may be issued upon the exercise of ISOs under the 1997 plan.
If a stock option granted under the 1997 plan expires, terminates or is otherwise canceled without being exercised in full, or if we reacquire shares of unvested common stock issued pursuant to the founder's stock purchase agreements, the shares of our common stock not acquired pursuant to the stock option or forfeited will again become available for subsequent issuance as options under the 2015 plan.
Administration. Our Board of Directors, or a duly authorized committee thereof, had the authority to administer the 1997 plan. Subject to the terms of the 1997 plan, the Board of Directors or the authorized committee, referred to herein as the plan administrator, had full power and authority to take all actions and make all determinations required or provided under the 1997 plan and any stock option agreement for stock options granted under the 1997 plan. The plan administrator determined recipients, dates of grant, the numbers and types of stock options to be granted and the terms and conditions of the stock options, including the period of their exercisability and vesting schedule. Subject to the limitations set forth below, the plan administrator also determined the exercise price of stock options granted and the types of consideration to be paid upon exercise of stock options.
Stock Options. Incentive stock options and nonqualified stock options were granted pursuant to stock option agreements adopted by the plan administrator. The plan administrator determined the exercise price for a stock option, within the terms and conditions of the 1997 plan, provided that the exercise price of a stock option cannot be less than the greater of par value or 100% of the fair market value of our common stock on the date of grant. Options granted under the 1997 plan vest at the rate specified by the plan administrator.
The plan administrator determined the term of stock options granted under the 1997 plan. In accordance with an optionholder's stock option agreement, if an optionholder's service relationship with us, or any of our affiliates, ceases for any reason other than disability, death or cause, the optionholder may generally exercise any vested options for a period of three months following the cessation of service. If an optionholder's service relationship with us or any of our affiliates ceases due to disability or death, the optionholder may generally exercise any vested options for a period of 12 months following disability or death. In the event of a termination for cause, options generally terminate immediately upon the termination of the individual for cause. In no event may an option be exercised beyond the expiration of its term.
Acceptable consideration for the purchase of common stock issued upon the exercise of a stock option were determined by the plan administrator and included in the option agreement and could include (i) cash or check, (ii) the tender of shares of the common stock of Senseonics, Incorporated previously owned by the optionholder, (iii) a combination of the foregoing, and (iv) a broker-assisted cashless exercise.
Unless the plan administrator provides otherwise in the stock option agreement governing the terms of the option, options generally are not transferable except by will, the laws of descent and distribution, or pursuant to a domestic relations order.
Tax Limitations on Incentive Stock Options. The aggregate fair market value, determined at the time of grant, of our common stock with respect to incentive stockunderlying options that are exercisable for the first time by an optionholder during any calendar year under allwithin 60 days of our stock plans may not exceed $100,000. Options or portions thereof that exceed such limit will generally be treated as nonqualified stock options. No incentive stock option may be granted to any person who, at the time of the grant, owns or is deemed to own stock possessing more than 10% of our total combined voting power or that of any of our affiliates unless (i) the option exercise price is at least 110% of the fair market value of the stock subject to the option on the date of grant, and (ii) the option is not exercisable after the expiration of five years from the date of grant.
Changes to Capital Structure. In the event that there is a specified type of change in our capital structure, such as a stock split or recapitalization, appropriate adjustments will be made to (i) the class and maximum number of shares reserved for issuance under the 1997 plan and (ii) the class and number of shares and exercise price, strike price, or purchase price of all outstanding stock options.
Certain Reorganizations and Mergers. If we are the surviving corporation in any reorganization, merger or consolidation with any other corporation, the number and class of shares and the exercise price subject to stock options previously granted under the 1997 plan will be proportionately adjusted to reflect the transaction.
Other Corporate Transactions. In the event of (i) our dissolution or liquidation, (ii) a merger, consolidation or reorganization following which we are not the surviving corporation, (iii) a sale of substantially all of our assets to another person or entity or (iv) any transaction that results in a change in control, all stock options granted under the 1997 plan will terminate, unless in connection with the transaction the Board of Directors approves the assumption of outstanding stock options by the successor corporation or the substitution of outstanding options for new options covering stock of the successor corporation or its parent, with appropriate adjustments to the number and kind of shares and the exercise prices of the stock options. In the event the outstanding stock options are terminated in connection with a transaction, the optionholders will have an opportunity to exercise their vested outstanding stock options before the occurrence of the transaction during such period as determined by the Board of Directors in its sole discretion.
Under the 1997 plan, a change in control is generally defined as any transaction that results in any person or entity, other than a person or entity who was a holder of Senseonics, Incorporated securities on June 30, 1998, owning 50% or more of the combined voting power of all classes of our stock, unless (i) the person or entity becomes the owner of 50% or more of the combined voting power of our stock due to our issuing new securities to the person or entity (other than an issuance pursuant to an underwritten public offering in which the acquisition is not approved by the Board of Directors) or (ii) at least two-thirds of members of the Board of Directors determine that the transaction does not constitute a change in control for purposes of the 1997 plan.
2016 Employee Stock Purchase Plan
In February 2016, our Board of Directors adopted and our stockholders approved a 2016 Employee Stock Purchase Plan, or our 2016 ESPP. The 2016 ESPP became effective on March 17, 2016. We have no current plans to grant purchase rights under our 2016 ESPP.
The maximum number of shares of our common stock that may be issued under our 2016 ESPP was initially 800,000 shares. Additionally, the number of shares of our common stock reserved for issuance under our 2016 ESPP will automatically increase on January 1 of each year, beginning on January 1, 2017 and ending on and including January 1, 2026, by 1.0% of the total number of shares of our common stock outstanding on December 31 of the preceding calendar year; provided, however, our Board of Directors may act prior to the first day of any calendar year to provide that there will be no January 1 increase in the share reserve for such calendar year or that the increase in the share reserve for such calendar year will be a lesser number of shares of common stock. As of January 1, 2017, the number of shares of common stock that may be issued under the 2016 ESPP was automatically increased by 935,696 shares, representing 1.0% of the total number of shares of common stock outstanding on December 31, 2016, increasing the number of shares of common stock available for issuance under the amended and restated 2015 plan to 1,735,696 shares. Shares subject to purchase rights granted under our 2016 ESPP that terminate without having been exercised in full will not reduce the number of shares available for issuance under our 2016 ESPP.
Our Board of Directors, or a duly authorized committee thereof, will administer our 2016 ESPP. We expect our Board of Directors will delegate its authority to administer our 2016 ESPP to our Compensation Committee under the terms of the Compensation Committee's charter.
Employees, including executive officers, of ours or any of our designated affiliates may have to satisfy one or more of the following service requirements before participating in our 2016 ESPP, as determined by the administrator: (i) customary employment with us or one of our affiliates for more than 20 hours per week and more than five months per calendar year; or (ii) continuous employment with us or one of our affiliates for a minimum period of time, not to exceed two years, prior to the first date of an offering. An employee may not be granted rights to purchase stock under our 2016 ESPP if such employee (i) immediately after the grant would own stock possessing 5% or more of the total combined voting power or value of all classes of our common stock, or (ii) holds rights to purchase stock under our 2016 ESPP that would accrue at a rate that exceeds $25,000 worth of our stock for each calendar year that the rights remain outstanding.
A component of our 2016 ESPP is intended to qualify as an employee stock purchase plan under Section 423 of the Code and the provisions of this component will be construed in a manner that is consistent with the requirements of Section 423 of the Code. In addition, the 2016 ESPP authorizes the grant of options to purchase shares of our common stock that do not meet the requirements of Section 423 of the Code because of deviations necessary to permit participation in the 2016 ESPP by employees who are foreign nationals or employed outside of the United States while complying with applicable foreign laws. Any such options must be granted pursuant to rules, procedures or subplans adopted by our Board of Directors designed to achieve these objectives for eligible employees and our company. The administrator may specify offerings with a duration of not more than 27 months, and may specify one or more shorter purchase periods within each offering. Each offering will have one or more purchase dates on which shares of our common stock will be purchased for the employees who are participating in the offering. The administrator, in its discretion, will determine the terms of offerings under our 2016 ESPP.
Our 2016 ESPP permits participants to purchase shares of our common stock through payroll deductions of up to 15% of their earnings. Unless otherwise determined by the administrator, the purchase price of the shares will be 85% of the lower of the fair market value of our common stock on the first day of an offering or on the date of purchase. Participants may end their participation at any time during an offering and will be paid their accrued contributions that have not yet been used to purchase shares. Participation ends automatically upon termination of employment with us.
A participant may not transfer purchase rights under our 2016 ESPP other than by will, the laws of descent and distribution or as otherwise provided under our 2016 ESPP.
In the event of a specified corporate transaction, such as a merger or change in control of our company, a successor corporation may assume, continue or substitute each outstanding purchase right. If the successor corporation does not assume, continue or substitute for the outstanding purchase rights, the offering in progress will be shortened and a new exercise date will be set. The participants' purchase rights will be exercised on the new exercise date and such purchase rights will terminate immediately thereafter.
Our Board of Directors has the authority to amend, suspend or terminate our 2016 ESPP, at any time and for any reason. Our 2016 ESPP will remain in effect until terminated by our Board of Directors in accordance with the terms of the 2016 ESPP.
Non-Employee Director Compensation
In February 2016, our Board of Directors approved a non-employee director compensation policy which became effective upon the completion of our public offering. Under this director compensation
policy, we pay each of our non-employee directors a cash retainer for service on the Board of Directors and for service on each committee on which the director is a member. The chairman of each committee receives a higher retainer for such service. These retainers are payable in arrears in four equal quarterly installments on the last day of each quarter, provided that the amount of such payment is prorated for any portion of such quarter that the director is not serving on our Board of Directors. No retainers were paid in respect of any period prior to the completion of our public offering. The retainers paid to non-employee directors for service on the Board of Directors and for service on each committee of the Board of Directors on which the director is a member are as follows:
| | Member Annual Service Retainer | Chairman Additional Annual Service Retainer | |||||
|---|---|---|---|---|---|---|---|
Board of Directors | $ | 35,000 | $ | 20,000 | |||
Audit Committee | 7,500 | 11,250 | |||||
Compensation Committee | 6,000 | 6,600 | |||||
Nominating and Corporate Governance Committee | 4,000 | 3,625 | |||||
In addition, under our non-employee director compensation policy, each non-employee director elected to our Board of Directors will receive an option to purchase shares of common stock with an aggregate Black-Scholes option value of $212,500. The shares subject to each such stock option will vest monthly over a three year period, subject to the director's continued service as a director. Further, on the date of each annual meeting of stockholders each non-employee director that continues to serve as a non-employee member on our Board of Directors will receive an option to purchase shares of common stock with an aggregate Black-Scholes option value of $106,500. The shares subject to each such stock option will vest on the one year anniversary of the grant date, subject to the director's continued service as a director. The exercise price of these options will equal the fair market value of our common stock on the date of grant. This policy is intended to provide a total compensation package that enables us to attract and retain qualified and experienced individuals to serve as directors and to align our directors' interests with those of our stockholders.
On June 20, 2016, we entered into a letter agreement with Mr. DeFalco, pursuant to which we granted Mr. DeFalco a fully vested restricted stock award under the amended and restated 2015 plan for 300,000 shares of our common stock in full satisfaction of our remaining obligations under that certain Transaction Bonus Agreement, dated December 4, 2015, by and between Senseonics, Incorporated and Mr. DeFalco. For additional information, see "Certain Relationships and Related Party Transactions, and Director Independence—Letter Agreement with Stephen P. DeFalco."
The following table sets forth information regarding compensation earned during the year ended December 31, 2016 by our non-employee directors for service on the Board of Directors from January 1, 2016 to December 31, 2016. Board of Directors and committee retainers were prorated for the period from March 17, 2016 to December 31, 2016. Timothy T. Goodnow, our President and Chief Executive Officer, also served on our Board of Directors, but did not receive any additional compensation for his service as a director and therefore is not included in the table below.
Dr. Goodnow's compensation as an executive officer is set forth below under "Executive Compensation—Summary Compensation Table."
Name | Fees Earned or Paid in Cash ($) | Stock Awards(1) ($) | Option Awards(2) ($) | Total ($) | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Stephen P. DeFalco(3) | 46,969 | 1,164,000 | 107,171 | 1,318,140 | |||||||||
M. James Barrett(3) | 29,250 | — | 107,171 | 136,421 | |||||||||
Edward J. Fiorentino(4) | 36,375 | — | 107,171 | 143,546 | |||||||||
Justin Klein(3) | 36,375 | — | 107,171 | 143,546 | |||||||||
Douglas S. Prince(4) | 43,313 | — | 107,171 | 150,484 | |||||||||
Douglas A. Roeder(3) | 38,700 | — | 107,171 | 145,871 | |||||||||
Steven Edelman(5) | 28,250 | — | 212,498 | 240,748 | |||||||||
(1)This column reflects the full grant date fair value of restricted stock granted during the year as measured pursuant to ASC Topic 718 as stock-based compensation in our consolidated financial statements. The restricted stock was granted to Mr. DeFalco was in satisfaction of our obligation to make a cash payment upon the completion of our public offering pursuant to the Transaction Bonus Agreement, dated December 4, 2015, by and between Senseonics, Incorporated and Mr. DeFalco, as described in "Certain Relationships and Related Party Transactions, and Director Independence—Letter Agreement with Stephen P. DeFalco." Unlike the calculations contained in our consolidated financial statements, this calculation does not give effect to any estimate of forfeitures related to service-based vesting but assumes that the director will perform the requisite service for the award to vest in full. The assumptions we used in valuing stock awards are described in Note 10 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016.(2)This column reflects the full grant date fair value for stock options granted during the year as measured pursuant to ASC Topic 718 as stock-based compensation in our consolidated financial statements. Unlike the calculations contained in our consolidated financial statements, this calculation does not give effect to any estimate of forfeitures related to service-based vesting but assumes that the director will perform the requisite service for the award to vest in full. The assumptions we used in valuing stock awards are described in Note 10 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016.(3)As of December 31, 2016, this director held options to purchase 54,629 shares of our common stock.(4)As of December 31, 2016, this director held options to purchase 138,529 shares of our common stock.(5)As of December 31, 2016, Dr. Edelman held options to purchase 94,599 shares of our common stock.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table provides certain information regarding our equity compensation plans in effect as of December 31, 2016:
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted-average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
Equity compensation plans approved by security holders: | ||||||||||
1997 Plan(1) | 8,864,588 | $ | 0.75 | — | ||||||
2015 Plan(2) | 2,525,185 | $ | 3.06 | 4,894,146 | ||||||
2016 ESPP(3) | — | — | 800,000 | |||||||
Equity compensation plans not approved by security holders | — | — | — | |||||||
| | | | | | | | | | | |
Total | 11,389,773 | 5,694,146 | ||||||||
(1)Upon the effectiveness of our 2015 plan, no additional further options or awards may be granted under the 1997 plan; all outstanding stock awards will continue to be governed by their existing terms.(2)On January 1 of each year, the number of shares reserved under the 2015 plan is automatically increased by 3.5% of the total number of shares of common stock that are outstanding at that time, or a lesser number of shares as may be determined by our Board of Directors. Pursuant to the terms of the 2015 plan, an additional 3,274,937 shares were added to the number of available shares effective January 1, 2017.(3)On January 1 of each year, the number of shares reserved under the 2016 ESPP is automatically increased by 1.0% of the total number of shares of common stock that are outstanding at that time, or a lesser number of shares as may be determined by our Board of Directors. Pursuant to the terms of the 2016 ESPP, an additional 935,696 shares were added to the number of available shares effective January 1, 2017.
TRANSACTIONS WITH RELATED PERSONSRELATED-PERSON TRANSACTIONS POLICY AND PROCEDURES
Related Person Transactions Policy and Procedures
We have adopted a related party transaction policy that sets forth our procedures for the identification, review, consideration and approval or ratification of related party transactions. For purposes of our policy only, a related party transaction is a transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which we and any related party are, were or will be participants in which the amount involved exceeds $120,000. Transactions involving compensation for services provided to us as an employee or director are not covered by this policy. A related party is any executive officer, director or beneficial owner of more than 5% of any class of our voting securities, including any of their immediate family members and any entity owned or controlled by such persons.
Under the policy, if a transaction has been identified as a related party transaction, including any transaction that was not a related party transaction when originally consummated or any transaction that was not initially identified as a related party transaction prior to consummation, our management must present information regarding the related party transaction to our Audit Committee, or, if Audit Committee approval would be inappropriate, to another independent body of our Board of Directors, for review, consideration and approval or ratification. The presentation must include a description of, among other things, the material facts, the interests, direct and indirect, of the related parties, the benefits to us of the transaction and whether the transaction is on terms that are comparable to the terms available to or from, as the case may be, an unrelated third party or to or from employees generally. Under the policy, we will collect information that we deem reasonably necessary from each director, executive officer and, to the extent feasible, significant stockholder to enable us to identify any existing or potential related-person transactions and to effectuate the terms of the policy. In addition, under our Code of Conduct, our employees and directors will have an affirmative responsibility to disclose any transaction or relationship that reasonably could be expected to give rise to a conflict of interest. In considering related party transactions, our Audit Committee, or other independent body of our Board of Directors, will take into account the relevant available facts and circumstances including:
•the risks, costs and benefits to us;•the impact on a director's independence in the event that the related party is a director, immediate family member of a director or an entity with which a director is affiliated;•the availability of other sources for comparable services or products; and•the terms available to or from, as the case may be, unrelated third parties or to or from employees generally.
The policy requires that, in determining whether to approve, ratify or reject a related party transaction, our Audit Committee, or other independent body of our Board of Directors, must consider, in light of known circumstances, whether the transaction is in, or is not inconsistent with, our best interests and those of our stockholders, as our Audit Committee, or other independent body of our Board of Directors, determines in the good faith exercise of its discretion.
CERTAIN RELATED PARTY TRANSACTIONS
Except as described below, there have been no transactions since January 1, 2016 to which we have been a participant in which the amount involved exceeded or will exceed $120,000, and in which any of our directors, executive officers or holders of more than 5% of our capital stock, or any members of their immediate family, had or will have a direct or indirect material interest, other than compensation
arrangements which are described under "Executive Compensation" and "Non-Employee Director Compensation."
Participation in Public Offering
Entities affiliated with New Enterprise Associates, Delphi Ventures, HealthCare Ventures, Energy Capital, LLC, and SBLE, LLC, each of which is a holder of more than 5% of our common stock, purchased an aggregate of 2,631,578 shares, 1,228,070 shares, 456,140 shares, 1,578,947 and 877,193 shares, respectively, of our common stock in our public offering. All shares were purchased at the public offering price to the public of $2.85 per share.
Registration Rights Agreement
We have entered into a registration rights agreement with certain of our 5% stockholders.
The registration rights agreement, among other things grants certain of our stockholders specified registration rights with respect to shares of our common stock issued upon conversion of the shares of Senseonics, Incorporated stock previously held by them.
Letter Agreement with Stephen P. DeFalco
In June 2010, Senseonics, Incorporated entered into a letter agreement with Stephen P. DeFalco, pursuant to which Mr. DeFalco provided Senseonics, Incorporated his services as the chairman of the Senseonics, Incorporated Board of Directors and, from June 2010 to November 2010, provided Senseonics, Incorporated with consulting services. Pursuant to the letter agreement, for his service as the chairman of the Senseonics, Incorporated Board of Directors, Mr. DeFalco was entitled to a fee of between 0.75% and 1.25% of the valuation of our company upon the closing of a public offering or a merger or consolidation with another company, a sale, disposition or lease of all or substantially all of their assets.
In December 2015, Senseonics, Incorporated and Mr.��DeFalco terminated this agreement and entered into a new agreement that superseded the prior agreement. Under the new agreement, Mr. DeFalco received a restricted stock grant of 190,000 shares of Senseonics, Incorporated common stock, which converted into 398,525 shares of Senseonics Holdings common stock in the Acquisition. One half of the shares covered by this restricted stock grant were fully vested on grant. The remainder would vest in full upon our completion of a public offering or private placement of our equity securities in which gross proceeds of at least $40 million are raised, which we refer to as a qualified financing. Additionally, upon a qualified financing, Mr. DeFalco would be entitled to receive a cash payment that, when combined with the value of the restricted stock grant, equals a percentage of our company valuation ranging between 0.75% to 1.25% of our company valuation, with the actual percentage determined based on the company valuation. Upon the completion of our public offering, which was a qualified financing, the remaining unvested shares vested immediately in full.
In June 2016, we entered into a letter agreement with Stephen P. DeFalco. Under the agreement, Mr. DeFalco received a fully vested restricted stock grant of 300,000 shares of our common stock in lieu of the cash payment required by, and in full satisfaction of our remaining obligations under, the December 2015 agreement.
Energy Capital, LLC Borrowing Facility
In connection with the Acquisition, we entered into a Note Purchase Agreement with Energy Capital, LLC, which holds more than five percent of our capital stock, pursuant to which Energy Capital could lend us an aggregate principal amount of up to $10.0 million, subject to specified conditions. During the year ended December 31, 2016, we borrowed an aggregate of $2.5 million from
Energy Capital, LLC. We repaid these borrowings in full with a portion of the proceeds of our public offering prior to December 31, 2016, and the Note Purchase Agreement was terminated. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Indebtedness."
Indemnification Agreements
Our amended and restated certificate of incorporation contains provisions limiting the liability of directors, and our amended and restated bylaws provides that we will indemnify each of our directors to the fullest extent permitted under Delaware law. Our amended and restated certificate of incorporation and amended and restated bylaws also provide our Board of Directors with discretion to indemnify our officers and employees when determined appropriate by the Board of Directors.
In addition, we have entered into an indemnification agreement with our directors and executive officers.
This year, a
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Secretary
September 4, 2020
. Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. q PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q A Proposals — The Board of Directors recommends a vote FOR both nominees listed and FOR Proposal 2. + 1. Election of Directors: 01 - Timothy T. Goodnow, Ph.D. For Withhold For Withhold 02 - M. James Barrett, Ph.D. ForAgainst Abstain 2. To ratify the selection by the Audit Committee of the Board of Directors of Ernst & Young LLP as independent registered public accounting firm for the fiscal year ending December 31, 2017. B Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. + 1 U P X 02L06C Annual Meeting Proxy Card X IMPORTANT ANNUAL MEETING INFORMATION
. Important Notice Regarding the Internet Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on May 24, 2017. The Proxy Statement and the 2016 Annual Report 10K to Stockholders are available at: http://www.edocumentview.com/SENS q PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Proxy — Senseonics Holdings, Inc. Notice of 2017 Annual Meeting of Shareholders Courtyard Marriott Gaithersburg Washington Center, 204 Boardwalk Place, Gaithersburg, Maryland 20878 Proxy Solicited by Board of Directors for Annual Meeting – May 24, 2017 Timothy T. Goodnow and R. Don Elsey, or together or either of them, referred to herein as the Proxies, each with the power of substitution, are hereby authorized to represent and vote the shares of the undersigned, with all the powers which the undersigned would possess if personally present, at the Annual Meeting of Stockholders of Senseonics Holdings, Inc. to be held on May 24, 2017 or at any postponement or adjournment thereof. Shares represented by this proxy will be voted by the stockholder. If no such directions are indicated, the Proxies will have authority to vote FOR both director nominees, and FOR Proposal 2. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting. (Items to be voted appear on reverse side.)
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MMMMMMMMMMMM . Admission Ticket MMMMMMMMMMMMMMM C123456789 000004 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext ENDORSEMENT_LINE______________ SACKPACK_____________ Electronic Voting Instructions Available 24 hours a day, 7 days a week! Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy. VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. Proxies submitted by the Internet or telephone must be received by 11:59 p.m., EDT, on May 23, 2017. MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6 Vote by Internet • Go to www.envisionreports.com/sens • Or scan the QR code with your smartphone • Follow the steps outlined on the secure website Vote by telephone • Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone • Follow the instructions provided by the recorded message Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Proposals — The Board of Directors recommends a vote FOR both nominees listed and FOR Proposal 2. 1. Election of Directors: + For Withhold For Withhold 01 - Timothy T. Goodnow, Ph.D. 02 - M. James Barrett, Ph.D. ForAgainst Abstain 2. To ratify the selection by the Audit Committee of the Board of Directors of Ernst & Young LLP as independent registered public accounting firm for the fiscal year ending December 31, 2017. Non-Voting Items Change of Address — Please print your new address below. Comments — Please print your comments below. Meeting Attendance Mark the box to the right if you plan to attend the Annual Meeting. Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. MMMMMMMC 1234567890 J N T MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND + 2 1 D V3 2 6 1 7 3 1 02L05C MMMMMMMMM C B A Annual Meeting Proxy Card1234 5678 9012 345 X IMPORTANT ANNUAL MEETING INFORMATION
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. 2017 Annual Meeting Admission Ticket 2017 Annual Meeting of Senseonics Holdings, Inc. Stockholders Wednesday, May 24, 2017 at 9:00 a.m. Local Time Courtyard Marriott Gaithersburg Washington Center 204 Boardwalk Place, Gaithersburg, Maryland 20878 Upon arrival, please present this admission ticket and photo identification at the registration desk. q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Proxy — Senseonics Holdings, Inc. Notice of 2017 Annual Meeting of Shareholders Courtyard Marriott Gaithersburg Washington Center, 204 Boardwalk Place, Gaithersburg, Maryland 20878 Proxy Solicited by Board of Directors for Annual Meeting – May 24, 2017 Timothy T. Goodnow and R. Don Elsey, or together or either of them, referred to herein as the Proxies, each with the power of substitution, are hereby authorized to represent and vote the shares of the undersigned, with all the powers which the undersigned would possess if personally present, at the Annual Meeting of Stockholders of Senseonics Holdings, Inc. to be held on May 24, 2017 or at any postponement or adjournment thereof. Shares represented by this proxy will be voted by the stockholder. If no such directions are indicated, the Proxies will have authority to vote FOR both director nominees, and FOR Proposal 2. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting. (Items to be voted appear on reverse side.)
